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Small Business Tax Guide

Small Business Tax Guide: Key Tips for Accurate Filing in 2025

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Are you confident your tax filing is accurate and complete? For many entrepreneurs, business tax for small business can feel overwhelming especially as tax rules, thresholds, and allowances change almost every year.

From understanding which taxes apply to your business to keeping up with policy updates and filing deadlines, staying compliant requires careful planning.

This guide explains small business tax obligations for the 2025/26 tax year, helping you navigate filings correctly, minimise liabilities, and avoid costly mistakes.

Reach out to one of our professionals to get to know about business tax for small business in the UK. Get in touch with us, and you will be provided instant professional help!

Types of Taxes Applicable to Small Businesses

Running a small business means dealing with multiple taxes. Understanding each one is essential for accurate filing and effective planning.

VAT (Value Added Tax)

VAT is charged on most goods and services in the UK.

  • You must register for VAT if your taxable turnover exceeds £90,000 in a 12-month period

  • Voluntary registration is allowed below this threshold

  • The standard VAT rate remains 20%

Corporation Tax

If you operate a limited company, Corporation Tax applies to your profits:

  • 19% for profits up to £50,000

  • 25% for profits above £250,000

  • A marginal rate applies to profits between £50,000 and £250,000

Income Tax

Income Tax mainly applies to sole traders and partnerships.

  • Personal Allowance (2025/26): £12,570

  • 20% on income from £12,571 to £50,270

  • 40% up to £125,140

  • 45% on income above £125,140

National Insurance Contributions (NICs)

NICs depend on your employment status.

Class 2 NICs

  • £3.50 per week (2025/26)

  • Self-employed individuals earning over £6,845 no longer need to pay, but their NI record remains protected

Class 4 NICs

  • 6% on profits between £12,570 and £50,270

  • 2% on profits above £50,270

Tax Deductions and Allowances for Small Businesses

One of the most effective ways to reduce business tax for small business is by claiming allowable expenses. These deductions reduce the profit you’re taxed on.

Common Allowable Expenses

Office Costs

  • Stationery, printing, and postage

  • Business phone and internet (business portion only)

  • Software subscriptions or short-term software licences

Business Premises

  • Rent, utilities, business rates, insurance

  • Repairs and maintenance

Working From Home

  • Flat rate: £6 per week without receipts

  • Proportionate household costs based on business use

Travel and Vehicles

  • Mileage (45p per mile for first 10,000 miles, then 25p)

  • Public transport and taxis

  • Parking, tolls, hotels, and meals for overnight trips

Staff Costs

  • Salaries, bonuses, pensions

  • Employer NICs

  • Agency and subcontractor fees

Other Allowable Costs

  • Protective clothing or uniforms

  • Stock and raw materials

  • Accountancy and legal fees

  • Bank charges and loan interest

  • Marketing and advertising

  • Training that maintains existing skills

Capital Allowances

Instead of expensing assets, businesses can claim capital allowances.

The Annual Investment Allowance (AIA) allows you to deduct 100% of qualifying equipment and machinery costs in the year of purchase, reducing your taxable profit immediately.

Key Policy Updates for the 2025/26 Tax Year

Preparing for the 2025/26 tax year means adapting to several important changes.

Major Updates

  • Employer NICs increase from 13.8% to 15% from 6 April 2025

  • Employer NIC threshold reduces from £9,100 to £5,000

  • Employment Allowance increases from £5,000 to £10,500, with the eligibility cap removed

  • Business Asset Disposal Relief (BADR) CGT rate increases to 14% (rising to 18% in April 2026)

  • Making Tax Digital (MTD) for Income Tax begins rollout from April 2026

  • National Minimum Wage and statutory payments increased from April 2025

Important Tax Deadlines for 2025/26

  • 5 October 2025 – Register for Self Assessment

  • 31 October 2025 – Paper tax return deadline

  • 31 January 2026 – Online tax return and payment deadline

Other Key Deadlines

  • Corporation Tax return: 12 months after accounting period end

  • Corporation Tax payment: 9 months and 1 day after period end

  • VAT returns and payments: 1 month and 7 days after quarter end

Important: If a deadline falls on a weekend or bank holiday, HMRC must receive payment on the last working day before it.

Steps to Ensure Accurate Tax Filing

Keep Detailed Records

  • Track income and expenses throughout the year

  • Retain invoices and receipts

  • Use MTD-compatible software where required

Use the Trading Allowance

  • £1,000 tax-free trading allowance

  • If expenses exceed £1,000, claim actual costs instead

Seek Professional Advice

An accountant can help you:

  • Identify all allowable deductions

  • Stay compliant with changing rules

  • File accurately and on time

Tax Planning Strategies for Small Businesses

  • Claim every allowable expense

  • Use capital allowances for large purchases

  • Make pension contributions for tax efficiency

  • Review your business structure as you grow

  • Stay updated or work with a tax professional

Tax Considerations by Business Type

Sole Traders

  • Pay Income Tax and NICs on net profits

  • File an annual Self Assessment tax return

Partnerships

  • Each partner reports their share of profits

  • Partnership tax return required

Limited Companies

Final Thoughts

Managing business tax for a small business doesn’t have to be stressful. With proper planning, accurate record-keeping, and smart use of allowances, you can stay compliant while reducing your tax burden.

Disclaimer:
This article, “Small Business Tax Guide: Key Tips for Accurate Filing in 2025, is for general information only and does not replace professional tax advice.

Need help? Cheap Accountants in London are available to guide you more on business tax for small businesses. Stay in touch!